Many people consider auto insurance only when they’re shopping for a new car. However, drivers can save a lot of money by shopping for a new policy at other times.
If you’ve had some lifestyle changes, it may mean that you’re eligible for cheaper and better coverage, says Christopher Brassard, executive vice president of the Ten Eyck Group, an insurance agency in Albany, N.Y.
“You could get a better price with certain carriers,” he says.
According to the pros, here are five reasons to shop for a new policy.
1. Your credit score is significantly lower or higher than when you first purchased the policy.
Many national car insurance companies consider your credit score when they determine an auto insurance premium. They may give a higher rate to people with a lower score, says Eric Poe, chief operating officer of Citizens United Reciprocal Exchange, an auto insurance company in Princeton, N.J.
“If your credit score is low, but you’re a good driver, you may find a better rate with a company that weighs other factors more heavily, such as your driving record,” Poe says.
He suggests finding such a company by contacting your insurance agent or state department of insurance for help.
Remember, credit score issues don’t only affect people with debt payment problems. Even borrowers with good credit can see their scores drop if they authorize multiple credit inquiries, says Brassard. Those authorizations could occur for a number of reasons, such as shopping for a new mortgage, buying furniture on a financing plan or opening a new credit card account.
Brassard notes that if your credit rating decreases right before your auto insurance comes due for renewal, and your insurance company takes the new rating into account, the lower score could mean a higher premium on the next insurance cycle.
“Timing can be an issue,” he says.
On the other hand, if your credit score has improved substantially since purchasing an auto policy, you may find a better rate with an insurance company that considers credit scores when determining rates.
2. You just got laid off, or start working from home.
Let an agent know if the number of miles on your commute has dropped significantly. Rates may drop if you’re driving less, Poe says. If not, shop around to try to find a company that has a lower premium.
The exact cutoff point for a low-mileage driving discount depends on the state you’re in, Poe says. For example, in New Jersey, drivers who commute less than three miles per day in one direction may have their cars rated for “pleasure use.” This gives the driver the same rate as someone who doesn’t commute to work, which is generally the lowest rate, Poe says.
3. You’re in the middle of a long-term car lease or loan.
Car loans seem to be getting longer and longer these days.
“I’ve seen some places advertising 60 and 72 months car loans,” says Brassard.
Such extended finance terms lower monthly payments but leave you financing most of the vehicle’s value. As the car gets older and it depreciates, you run the risk of becoming “upside down” on the loan, or owing more money on it than it’s worth, Brassard says.
This may not seem like a problem if the vehicle is in good condition and you’re making timely payments. But if you get into an accident and the car is totaled, the insurance company will probably only pay out its market value. When that amount is less than what is owed, you could be stuck with an unpaid loan and no working car.
One solution to this problem is to shop for gap insurance, which covers the gap between the insurance company payout and what is owed on the loan, Brassard says.
Many leasing companies — as well as some banks and insurance companies — offer gap coverage, he says. Brassard adds that some auto insurance companies may also offer a replacement cost endorsement to their policies. This endorsement would pay for the replacement cost of the covered vehicle.
4. You buy a home, or obtain a company car.
Ask for a multipolicy discount if you purchase homeowner’s insurance through the same company that insures your car.
“If someone is shopping for insurance, they might as well look at the whole ball of wax with a good agent, because there are package policies that can save them money or provide better coverage,” Brassard says.
Another time to shop around is after receiving a company car for your job, Brassard says.
“Even if you only own one car, but you also have a company car, some insurance companies may still give you multiple-car discount,” he says.
5. Your children reach driving age.
Once your child gets his or her license, it’s time to call up insurance companies to see which ones offer the best prices, Brassard says.
“The same insurance carrier that’s been providing you with great rates for years may not be as competitive once a younger driver is added to the policy,” he says.